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Tuesday, August 28, 2012

Corporate Welfare Deadbeats

Not only are corporations robbing countries of billions (trillions
world-wide) of tax revenue while being giving low tax rates on the money they
do claim, they are hording the wealth that they let us know about instead of
using it to improve the economy. The rest is hidden in shell-companies in tax
havens invoiced so it doesn’t appear as profit. Thanks Harper and you other
neoliberal scum for making it even easier, and thank you Royal Bank and Scotia
Bank for setting up these tax evasion schemes (as well as the countries in some
cases) and bankrupting countries so they have to borrow. It’s a nice vicious
little circle you have built.

The following is a re-post of an article from Rabble.ca showing how corporations
are pushing for lower wages and union-busting while hoarding cash. Harper
is doing all he can to help them, so they will give him a cushy job when we finally
kick him out (to go with the cushy pension he hasn’t earned).

Corporations aren’t
job creators; they are exploiters, robbers and would like to be slave owners. Multinational
ones take this attitude to the level of a country. They are bringing our
society down for shareholder profit and management bonuses.

Kudos to Bank of Canada Governor Mark Carney for raising the profile of
the over $500 billion Canadian corporations are holding in excess cash
surpluses and not investing in the economy, which garnered
front-page coverage (and kudos to the CAW for inviting him to speak.)

It's not the first time he's raised this concern. Last year at the
Empire Club he
told assembled business leaders that their companies were in
"rude health, have the means to act -- and the incentives," urging
them to invest their surpluses. After cutting corporate tax rates, Finance
Ministers Flaherty
and Duncan have also demonstrated frustration with Canadian businesses for not
investing enough in the economy and urged them to invest more.

Contributors to this
blog, including Jim Stanford, Erin Weir, Andrew Jackson and
myself have raised concern about corporate Canada's growing corporate cash
hoards and surpluses for much longer.

It's important to recognize that this half a trillion didn't just fall
from the sky into the corporate coffers. As I pointed out on page 6 of this piece published
in early 2007, the growing corporate surpluses ($300 billion at that time)
represented an unprecedented shift in the balance between household and
corporate sectors.

Prior to a dozen years ago, Canada's household sector had traditionally
run surpluses which were then lent to corporations to invest in the economy. As
a result of slow wage growth, high profits, corporate tax cuts, rising house
prices, and slow rates of business capital investment, that relationship
completed changed around 2000 -- and it's got much worse. Above is an updated
version of the slide, which I've used in many presentations since.

The flip side of the growth of these unprecedented corporate surpluses
and the resulting growing cash hoards is of course record rates of household
indebtedness -- which is a major threat to our economy. While there's always
alarmism about government sector deficits, one of the underlying problems that
helped cause the crisis and is a factor in our slow rates of growth was this
imbalance and the growing rates of household indebtedness.

It's not just Canada, but similar trends occurred in the U.S. and
Europe. And it's a double-edged sword. While CEOs may claim their surpluses and
cash hoards are a buffer against economic uncertainty (as Matt Campbell did in
the Globe),
much of the non-financial corporations surpluses ultimately went into the
increased financial speculation that caused the financial and economic crisis.
In these ways, it's not "dead money" any more than zombies are dead:
it's money that, while seeming to keep their hosts alive, has played havoc with
the rest of us. Even the OECD
and the IMF now
seem to recognize to some degree that growing inequality of income (and between
sectors
of the economy, which is related) is bad for the economy.

Our finance ministers have used tax cuts, low interest rates, wage
suppression, deregulation, etc. etc. ostensibly to get corporations to invest
more of their profits and surpluses in the economy -- but it hasn't worked. Now
they (and Carney) are trying to use moral persuasion, but that's unlikely to
work either.

Capitalism, in its different forms, isn't supposed to be swayed by any
morals beyond its own: maximizing short-term profits. If CEOs don't see any
potential reward for making an investment (whether through profits or
personal reward through share buybacks and stock options), then they aren't
likely to do it. And if there's a lack of demand for their products, then they
aren't going to invest.

Returning excess cash to shareholders, as Carney urged them to do if
they aren't going to invest, isn't going to help much either. While pension
funds could also benefit, much of this will go to the wealthiest in society.
This will not only lead to less economic stimulus (as they have a lower
propensity to spend), but it will also increase inequality and economic
instability -- as even the IMF, OECD and Conference Board now recognize. And if
the wealthy are to invest it, where would they invest it: back into companies
that aren't investing in the economy, speculative financial investments, or
into more real estate, blowing up that bubble even more?

There's a simple and straightforward solution. If corporations aren't
going to invest despite all that's been provided to them, then governments
should tax these surpluses back through various means and use the revenue to
increase public investment in the economy and redistribute the wealth to reduce
inequality including by expanding
public services, which will go a long way to improving the precarious state
of household finances.

(Of course, we're not going to get much of this from most of our
existing governments. With the failure of supply-side economic policies in
stimulating investment and the economy, I expect that Flaherty and Co. will
instead accelerate privatization and P3s in their coming budgets: essentially
handing over public assets and investment opportunities at the public's expense
on a platter to private business who are failing to invest money into the
private sector.)

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About Me

The Pündi are a race from my fantasy novels, the Continuum Chronicles, an exploration of spiritual evolution theory. Appearing like us, they are really child-sized aliens cursed by their own intelligence, trapped as observers unable to share their knowledge. They often develop an individual obsessive interest.

I write and publish, not selling anything, just trying to share ideas that might profit everyone. I aim not for originality but creativity, organizing what exists to generate new associations. I'm a writer with thick glasses and autism, familiar with the struggle for clarity. Novelist, researcher, internet activist, spiritual evolutionist, and process philosopher, I believe in democratic social capitalism with a well-regulated engine of sustainable markets. As a writer, I find that most blockages tend to be improvements trying to occur to me.